Cloud // Infrastructure as a Service
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11/16/2011
02:00 PM
Fritz Nelson
Fritz Nelson
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It's A New Dell

Michael Dell talks customer outcomes, not infrastructure, as he sits down with InformationWeek editors--but he's got plenty of PC fight left in him.

InformationWeek Now--What's Hot Right Now
Michael Dell practically bounds into a small conference room at Dell headquarters, all smiles after a day of meeting with customers in a nearby solutions center, his shirt unbuttoned one past comfortable. Five or six InformationWeek editors, having met with some of Dell's leadership team for six straight hours, are fading, but he's just getting warmed up.

"It's a new Dell," he says emphatically.

Consider that Dell has acquired nine companies and added 11,000 employees in the past year alone, he says. (As my colleague Mike Fratto notes, that reflects Dell's focus.) Over the past five years, with the founder at the helm once again, the company has moved aggressively into storage, networking, and IT services and modified its almost religious commitment to direct sales to include thousands of channel partners--all while maintaining a No. 1 or No. 2 position in its core server and PC markets.

The last four quarters have seen earnings per share grow 83%, he emphasizes. On Nov. 15, five days after we visited Dell, the company announced that its third-quarter operating income, earnings per share, and gross margins were all up compared with a year ago, even if its revenue was flat. That's OK, Dell says. The company is emphasizing higher-value deals.

[ See our in-depth analysis, Dell's Earnings Don't Tell Big Transformation Story. ]

If most customers only view Dell as selling the IT infrastructure that underpins their operations, the CEO wants it to be known that it's also helping them "drive outcomes." For instance, earlier in the day of our interview, Dell had met with a large healthcare customer. "We're running their electronic health records system, we're running their hospital information system, we're running their evidence-based medicine system, we're helping them with claims, we're helping them modernize their applications, we're helping them with their mobile clinical computing strategy, we're helping them with security...all the things that drive outcomes for their patients," he says, without a mention of PCs, servers, and storage.

Dell knows that this sort of transition from tactical supplier to strategic partner doesn't happen overnight. Just competing in software (storage management, virtualization, deduplication) and services (cloud, integration, consulting) is a "huge change," he says. "That's not to say we're done, or that we're a leading company in all of those spaces, but we're there and we're competing."

For instance, on the third-quarter earnings call, Dell executives emphasized the company's growth in enterprise solutions and services (up 8% year-over-year, now accounting for 46% of the company's gross margin). Server and networking revenue rose 13%, and while storage revenue fell 15%, when isolating Dell storage IP, where the company has placed heavy emphasis, that revenue was up 20%.

To drive home his point about the company becoming a higher-level competitor, Michael Dell talks about big data (or as he and his fellow execs like to call it: big insights, big impact, big decisions), citing companies with 10,000 or fewer employees as an enormous opportunity. Dell's biggest competitors--Hewlett-Packard, IBM, EMC, Cisco, even Oracle--have big data solutions; Dell sells servers and storage, though it recently announced a Hadoop appliance. Dell may be getting ahead of itself here, even if its storage technology underpins how big data is delivered. Going from technology to solutions, even for a $60 billion company like Dell, isn't trivial. "You don't do it with the same people and skills," the CEO says, pointing to the 45,000 employees now in Dell's services division, in part from its $3.9 billion acquisition of Perot Systems in 2009.

Michael Dell is realistic enough to know where his company's bread is buttered, especially in emerging markets. "If you go to a tier 4 city in China and you say, 'Hey, do any of you guys want to buy a smarter planet?' they'll say, 'What the heck are you talking about,'" he says with a sneaky grin. His point: Those people need basic computing.

When asked whether HP's recent flip-flop on its commitment to the end-user device business had spread enough uncertainty to create a big opportunity for Dell, he responds: "Just the fact that you asked the question...the answer is yes."

Dell is combative when discussing the notion of a post-PC era, arguing that the PC will remain the main consumer and business computing device, even with the explosive growth of smartphones and tablets. He made it clear that Dell plans to stay in the business of making PCs. "If you go out into the future 10 years ... maybe you talk to your computer, maybe it's a hologram, maybe it's blasted on your retina, who knows," Dell says. "But there's gonna be one. There could be more than one of them, there could be tiny little ones that you carry with you, there could be bigger ones with bigger screens."

He adds: "Those devices are fundamental to how this company operates and does what it does."

There may indeed be a new Dell, but there's still plenty of the old Dell.

Fritz Nelson is the editorial director for InformationWeek and the Executive Producer of TechWebTV. Fritz writes about startups and established companies alike, but likes to exploit multiple forms of media into his writing.

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Guest
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Guest,
User Rank: Apprentice
11/17/2011 | 8:52:51 AM
re: It's A New Dell
Michael Dell is talking out of both sides of his mouth. He wants to drive "customer outcomes" and work on business solutions, yet he is belittling IBM's "Smarter Planet" initiative, which Dell apparently doesn't realize are industry "business outcome" solutions, and thinks companies want to focus on "basic computing." He wants to work on "Big Data" (never mind that Dell has no ECM software, analytics software, or even infrastructure optimized to the task), but he is focused on growing the commodity PC market and maybe smartphones and tablets, not sure.

Net: Dell is going to try to be great at everything. It sounds like a company trying to find its way. They want to be IBM... and Oracle... and Apple... and still beat HP and Lenovo on the commodity side.
gwebster329
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gwebster329,
User Rank: Apprentice
11/19/2011 | 4:06:39 AM
re: It's A New Dell
I wish that Mr. Dell could (would) read the pages of email trying to keep this summerG«÷s purchase of OptiPlex desktops working. Unfortunately, we own 60 of these computers that are only four months old. The mini-towers have a failure rate of 40% and the small form factor rate is now more than 10%. (In four months!)
I have spent dozens of hours of working with Dell Support across the last three (3) months. Only one Dell individual, Lee Kahler (Lee_Kahler@dell.com) has been able to provide any real help. And, even in that case, it appears to be a workaround rather than a permanent solution for some of our issues with the OptiPlex 390 desktops. I am certain that I will need to continue my relationship with Dell support. I am equally certain that there is nothing I can do that will improve the once great product or once adequate service.
We are a small charter high school of 650 students. Until very recently, we have been a postcard advertisement for Dell. All 14 of our physicals servers are Dell. Two years ago we made our first non-Dell purchase of 25 HP thin clients. That same year, we began to have failures of that summerG«÷s purchase of 30 Dell, Vostro Desktops. This summer we purchased a cart of 25 HP laptops for the math department with no issues to date. That purchase decision was based on price/performance comparisons with Dell. Today, 90 days later, Dell would not be considered based on their demonstrated lack of reliability. Also, at anything below the supervisory level, their service personnel have demonstrated an equal lack of knowledge, professionalism and even basic manners.
I continue to be a great admirer of Michael Dell. I believe that he is providing first class leadership in very difficult times. I believe he has no one else watching the other sides of his ship. Will I buy more of his computers or recommend them to my kids? Not likely!

Guest
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Guest,
User Rank: Apprentice
11/21/2011 | 4:24:17 AM
re: It's A New Dell
If you are going for quality, it is Apple on the PC side and IBM on the server side. They may cost you a bit more, but they will last twice as long and you will spend less time on the phone with support telling you that they understand and can't help.
gwebster329
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gwebster329,
User Rank: Apprentice
11/21/2011 | 1:21:39 PM
re: It's A New Dell
I donG«÷t want to get into any argument about who makes the best G«£stuffG«•. I can only pass on our personal experience as a business customer. In this recent case, Dell went from being and exceptionally good vendor to really poor.
And, I also mistakenly left out our Apple experience. Our music department does have a cart of 25 MacBooks, a couple of iMacs and a MacBook Pro. On the downside, they have had a very high failure rate (and high initial cost). The upside, Apple service and repair has been first rate.
WVORIS000
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WVORIS000,
User Rank: Apprentice
11/21/2011 | 9:47:37 PM
re: It's A New Dell
If you go out into the future 10 years ... maybe you talk to your computer, maybe it's a hologram, maybe it's blasted on your retina, who knows? Me, see William T. Voris' web site for details.
sammythehead
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sammythehead,
User Rank: Apprentice
11/29/2011 | 12:58:15 AM
re: It's A New Dell
Simon,

I believe he was actually recognizing that IBM is his greatest competitor here by making this comment. He was merely saying that the market for providing comprehensive business solutions is still limited in certain areas, such as Tier 4 cities. I would imagine the market for "business outcome" solutions would be great in Tier 1-3 cities in China. By making this comment he's making the point that Dell understands their is still a market for their laptops and PC's.
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